NSEL crisis: Govt asks Sebi to act against defaulting brokers

Seeking to expedite recovery of money in the Rs 5,574-crore NSEL payment crisis, government today decided to take immediate steps for auction of non-encumbered properties and also asked markets regulator Sebi to initiate action against defaulting brokers.
The government also said that the CBI is enquiring into the conduct of government officials, including those from two public sector undertakings, to ascertain whether they were involved in abetting the payment crisis at the National Spot Exchange Ltd (NSEL).
The Rs 5,574-crore payment and settlement crisis at the exchange came to light in August-September 2013 and since then the matter has come under the scanner of multiple agencies as well as the Corporate Affairs Ministry.

At a meeting chaired by Economic Affairs Secretary Shaktikanta Das here today, the Maharashtra government has been asked to take immediate action for auctioning the properties which do not have any encumbrance or have approval of the court.
Besides, the Maharashtra government would actively pursue with the MPID court to obtain early orders for auctioning of the remaining attached properties and also appoint a senior advocate for the same.
The meeting reviewed the action taken and progress made on the Recommendations made by the Special Team of Secretaries (STS) to ensure that there is no systemic impact of the NSEL crisis.

An official release said the Corporate Affairs Ministry has been advised to decide on the draft order of the proposed merger of NSEL with its parent FTIL by February 15 - the time stipulated by court.

In October 2014, the Ministry had ordered the merger but the draft order has been challenged. FTIL owns little over 99 per cent stake in NSEL, which is non-operational now.
At the meeting, it was also decided that Securities and Exchange Board of India (Sebi) would examine and take the necessary action against defaulting brokers as per law, the release said.
"Besides, as directed by the Madras High Court, the Company Law Board (CLB) may be moved to decide the case relating to FTIL by March 11, 2016.

"Ministry of Corporate Affairs has decided to file an SLP (Special Leave Petition) in the Supreme Court against the decision of Madras High Court. They were requested to expedite the same," it added.
According to the release, CBI is enquiring into the conduct of government officials, including that of two public sector undertakings, with a view to ascertain inter alia whether they were in any way involved in abetting the NSEL payment crisis.
In the wake of the NSEL crisis, a Special Team of
Secretaries (STS) was set up in August 2013 and it had submitted its report in September that year.

The issues raised by the committee are being investigated and the progress made in this regard is being regularly monitored through meetings under the chairmanship of Economic Affairs Secretary.
So far, ten such meetings have taken place and the last one was today.
The Corporate Affairs Ministry is working on the merger of NSEL with FTIL. Bombay High Court has granted the Ministry an extension of time up to February 15 for taking final view on the draft order of the amalgamation.
According to the release, the Economic Offence Wing of Mumbai Police has secured property worth Rs 6,375 crore under the Maharashtra Protection of Interest of Depositors Act (MPIDA), out of which, attachment of properties worth Rs 5,357 crore has been notified in the gazette of the Maharashtra government.

"High Court of Mumbai has upheld the applicability of provisions of MPID Act to this case in a writ petition. EoW has so far arrested 30 persons and issued Look Out Notices for 65 persons. The investigation is underway. The process of auctioning properties has started with two such properties being auctioned on March 15, 2016," it noted.
Besides, the Enforcement Directorate has carried out 24 search and 10 survey operations under the provisions of Prevention of Money Laundering Act, 2002 (PMLA). It has filed prosecution complaint before the Special PMLA Court, Mumbai against NSEL and 67 other accused persons under PMLA, 2002.

"The Finance Intelligence Unit (FIU) of India passed an order on November 4, 2015 under Section 13 of the PMLA imposing a penalty of Rs 1.66 crore on the NSEL for non-compliance of the Act," the release said.
The panel had looked into possible violation of laws and regulations by the exchange, associated companies and participants.
Besides, it had suggested measures to ensure that there is no systemic impact of NSEL developments.
(REOPENS DCM116)
Later in a tweet, BJP MP from Mumbai Kirit Somaiya hoped for an early relief to investors in the NSEL crisis soon.
"... I met Ministry of Corporate Affairs today and EOW police yesterday. Both assured action. Expect relief for investors in two days," he said.